An unnamed Chinese automaker to establish a CKD factory in Tijuana, Mexico

Baja officials say they've lured Chinese automaker

Tijuana may be site of assembly facility
By Diane Lindquist
UNION-TRIBUNE STAFF WRITER

June 6, 2007

Tijuana could be getting the first Chinese automotive factory in North America.
Returning from an Asian trade mission last week, Baja California Gov. Eugenio Elorduy Walther released information that a Chinese carmaker plans to invest $300 million to establish an auto assembly factory in the border city that would employ 3,000.



AdvertisementSergio Tagliaprietra, the state's economic development secretary, said this week that he is unable to provide further details. He declined to identify the company or the vehicle or vehicles it would produce.
“The announcement would come from the business,” he said.

Officials at the Chinese consulate in Los Angeles and the Chinese Embassy in Washington, D.C., could not be reached for comment.

The arrival of such a large Chinese venture in Baja California would be ironic since about one-third of the maquiladora manufacturing plants the state lost during the 2000-03 industry crisis relocated to China.

A Tijuana auto plant would not be the first North American presence for a Chinese automaker. In March, the newly formed Tiger Truck company started construction on an assembly plant in Jasper, Texas, to produce small, off-road trucks based on designs from the private ChangAn Automobile Group. ChangAn is China's third-largest automaker.

Chery Automobile, a government-controlled company based in Shanghai, plans to start exporting two car models to Mexico in the near future. Some see that move as a prelude to eventual assembly of the vehicles at Chrysler's manufacturing plant in Toluca. The two companies have been talking about various cooperative efforts, including selling Chery-built cars in North America under the Chrysler nameplate.

There are more than 100 Chinese automakers, most fewer than eight years old, and auto analysts consider about 18 to 20 truly competitive, with production large enough to consistently supply China's growing market demand.

Domestic production capacity in China has reached 3 million vehicles a year, with annual increases ranging from 20 percent to 25 percent.

It is unknown whether a Chinese company manufacturing in Tijuana would attempt to follow the lead of Japanese and Korean automakers in penetrating the cutthroat U.S. automotive market, the analysts said.

Such a move would represent a relatively new strategy for the Chinese industry, which has tended to form joint ventures with foreign manufacturers and concentrate on exporting to developing nations, such as those in South America and Eastern Europe, analysts said.

Eighty percent of production at the Tiger Truck plant, for instance, initially will be exported. And the Chery vehicles expected to be made at Chrysler's Toluca plant would be sold in Central and South America.

“The new . . . China invasion?” said China Automotive Review chief editor Wayne Xing in an e-mail from China. “More accurately, what we are seeing is a new American investment drive in importing Chinese-made vehicles.”

Tim Dunne, director of Asia Pacific market intelligence for J.D. Power and Associates, agreed.

“They're very young and to start looking overseas is a challenge,” he said. “They don't want to go into a market where they could damage their brand reputation.”

Baja California lacks the automotive supply and distribution infrastructure of many other Mexican states. Chihuahua, for example, has hundreds of parts factories linked to production facilities throughout the United States and Canada.

Nevertheless, there are numerous automotive supply operations in Baja California. Toyota has invested nearly $98 million since 2002 on a Tacoma truck factory on 700 acres at the outskirts of Tijuana. It employs 760 workers who will assemble 50,000 pickups and 200,000 pickup beds this year.

A few years ago, Baja California officials expected to gain an automotive assembly plant investment from Kia Motors, South Korea's second-largest carmaker. The company reportedly took an option on land near Rosarito Beach, but no factory materialized.

Still, said J.D. Powers' Dunne, Chinese carmakers might not encounter the same challenges penetrating the U.S. market from Tijuana that Honda and Toyota did in the 1980s when they had no local supplier base.

These days, there's no need for those suppliers to be located near the factories because all the parts that are needed can be shipped by sea in a crate, Dunne said. The practice is known as a “complete knockdown,” or CKD, kit.

The Chinese auto manufacturer might be looking to Baja California to establish a beachhead in a developing economy where it can get acclimated to the North American market, Dunne said.

“This is a very serious endeavor and not to be taken lightly,” he said.

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